Tribunal upholds assessee's depreciation claim, dismisses Revenue's appeal

The Tribunal affirmed the decision of the Ld.CIT(A) to delete the addition of Rs. 27,88,184/- made on account of incorrect depreciation claimed by the assessee. The Tribunal found the depreciation claim valid, even though it was not reflected in the balance sheet, as the assets were used for business purposes. The Tribunal held that the depreciation could be claimed in the income tax return, confirming the legitimacy of the assessee's claim and dismissing the Revenue's appeal.

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Issues Involved:
- Whether Ld.CIT(A) was justified in deleting the addition of Rs. 27,88,184/- made on account of incorrect depreciation claimed by the assessee.

Analysis:
1. The appeal pertained to the assessment year 2012-13 and was directed against the order of the Ld. Commissioner of Income Tax(Appeals) arising from the order framed under section 154 of the Income Tax Act 1961 by ITO-2, Ratlam. The Revenue challenged the deletion of the addition of Rs. 27,88,184/- on account of incorrect depreciation claimed by the assessee.

2. The assessee, an individual conducting business under sole proprietorship, initially declared income of Rs. 4,22,050/-, later revised to Rs. 4,90,390/-. The assessment under section 143(3) of the Act was completed assessing income at Rs. 6,80,390/-. Subsequently, a rectification order was passed under section 154 observing incorrect depreciation claim of Rs. 27,88,184/- on machinery and building, not reflected in the audited balance sheet.

3. The Ld.CIT(A) allowed the assessee's appeal, citing that the depreciation claim was legitimate as the assets were used for business purposes. The Revenue, aggrieved by this decision, appealed to the Tribunal solely on the issue of deletion of the depreciation addition.

4. During the Tribunal hearing, the Revenue argued in support of the Assessing Officer's order, while the assessee's counsel contended that depreciation can be claimed in the income tax return even if not reflected in the books of accounts. The Tribunal reviewed the submissions and found the depreciation claim of Rs. 26,80,229/- valid, including depreciation on machinery and factory building.

5. The Tribunal noted that the claim for depreciation was eligible even if not shown in the balance sheet, citing a similar precedent where depreciation on assets not reflected in the balance sheet was allowed. The Tribunal confirmed the Ld.CIT(A)'s decision, stating that the assets were used for business purposes, and the depreciation claim was legitimate.

6. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the addition of Rs. 27,88,184/- on account of incorrect depreciation claimed by the assessee.

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